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      Today’s Top News: The Growing 2024 G.O.P. Field, and More

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      The New York Times Audio app includes podcasts, narrated articles from the newsroom and other publishers, as well as exclusive new shows — including this one — which we’re making available to readers for a limited time. Download the audio app here.The Headlines brings you the biggest stories of the day from the Times journalists who are covering them, all in about 10 minutes. Hosted by Annie Correal, the new morning show features three top stories from reporters across the newsroom and around the world, so you always have a sense of what’s happening, even if you only have a few minutes to spare.From left: Former Gov. Chris Christie of New Jersey, former Vice President Mike Pence and Gov. Doug Burgum of North Dakota.Charles Krupa/Associated Press, Alex Brandon/Associated Press, Mike Mccleary/The Bismarck Tribune, via Associated PressOn Today’s Episode:The U.S. and Russia Say a Major Ukrainian Operation Has Begun, with our Ukraine correspondent Thomas Gibbons-NeffS.E.C. Accuses Binance of Mishandling Funds and Lying to Regulators, with our finance reporter Emily FlitterThe 2024 G.O.P. Field Balloons This Week, Adding Three New Candidates, with our national correspondent Trip GabrielEli Cohen More

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      Lies, Charges and Questions Remaining in the George Santos Scandal

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      Representative George Santos of New York was indicted this week by federal prosecutors on 13 felony counts largely tied to financial fraud. Almost immediately after his election in November, The New York Times began scrutinizing his background. Mr. Santos has misled, exaggerated to or lied to voters about much of his life, including his education; […] More

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      Republicans planning legal assault on climate disclosure rules for public companies

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      Republicans planning legal assault on climate disclosure rules for public companiesThe SEC’s proposed new rules, which would require public corporations to disclose climate-related information, have been critized by industry groups Republican officials and corporate lobby groups are teeing up a multi-pronged legal assault on the Biden administration’s effort to help investors hold public corporations accountable for their carbon emissions and other climate change risks.The US Securities and Exchange Commission (SEC) proposed new climate disclosure rules in March that would require public companies to report the climate-related impact and risks to their businesses.The regulator has since received more than 14,500 comments. Submissions from 24 Republican state attorneys general and some of the country’s most powerful industry associations suggest that these groups are preparing a series of legal challenges after the regulation is finalized, which could happen as soon as next month.“I would expect a litigation challenge to be brought immediately once the final rule is released,” Jill E Fisch, a business law professor at the University of Pennsylvania, told the Guardian. “They probably have their complaints already drafted, and they’re ready to file.”Some opponents claim that requiring companies to publish climate-related information infringes on their right to free speech. Others (often the same ones) say that the rule exceeds the SEC’s legal authority.Both critiques feature prominently in comments from the Republican attorneys general and the US Chamber of Commerce, which spent more than $35m lobbying the federal government in the first half of 2022, according to OpenSecrets. The Republican letter warns that if the new disclosure requirements are finalized, “capitalism will fall by the wayside.”The SEC proposal does not establish environmental policy or require that companies take any climate-related actions other than making more information publicly available.The free speech and legal authority objections have been met with profound skepticism from legal experts and former SEC officials.In a letter to the commission, John Coates, a Harvard Law School professor and former SEC general counsel, said that instead of challenging the climate disclosure rule on its merits, “critics have resorted to mischaracterizing the proposal, and inventing their own, fictional rule”.How a top US business lobby promised climate action – but worked to block effortsRead moreIn another letter, a bipartisan group of former SEC officials, legal scholars, securities law experts and corporate lawyers noted that “the SEC has mandated environmental disclosure at least as far back as the Nixon administration.” Even though not all of the letter’s authors support the substance of the rulemaking, they agreed without exception “that there is no legal basis to doubt the commission’s authority to mandate public-company disclosures related to climate.”“The SEC is promulgating a disclosure rule that’s square within its wheelhouse,” said Fisch, of the University of Pennsylvania. “It’s exactly what Congress told it to do, and which it has done consistently since 1933.”But the legal authority and free speech charges, however tenuous, are not the only grounds on which opponents of the climate disclosure rule have hinted at litigation.In a recent analysis, the Guardian revealed how the Business Roundtable, a lobbying group for CEOs of America’s biggest companies, opposes a key provision of the SEC proposal that would require some large companies to measure and report emissions generated throughout their supply chains – known as Scope 3 emissions.Chart showing the difference between Scope 1, 2, and 3 emissions.In addition to challenging the substance of the rule, the Business Roundtable also rejects the SEC’s estimate of how much it would cost businesses to comply. (The organization said in an email that its comments “[are] focused on identifying challenges in the proposed rule in the hopes the SEC will address them.”)The SEC projects that companies will face compliance costs of $490,000 to $640,000 in the first year of climate reporting, and less in subsequent years. (By comparison, a 2019 study predicted that climate change could cost firms around $1trn over the following five years.)A detailed assessment from Shivaram Rajgopal, Columbia Business School professor of accounting and auditing, concluded that even without taking into account any benefits from the climate disclosure rule, the costs would prove negligible for most firms. “The loss in market capitalization, if any, from compliance costs is likely too tiny for any outsider to detect and to separate from daily volatility in the stock returns for unrelated reasons,” Rajgopal wrote.Last quarter ExxonMobil earned nearly $18bn in profit, the largest quarterly earning in the company’s history. Over the same period, General Motors generated more than $35bn in revenue, while Walmart reported revenues of nearly $153bn. The Economist recently reported that after-tax corporate profits as a share of the US economy have surged to their highest level since the 1940s.ExxonMobil, GM and Walmart are members of the US Chamber of Commerce and the Business Roundtable. According to a report from the nonprofit Center for Political Accountability, during the 2020 election cycle each company donated at least $125,000 to the Republican Attorneys General Association, which supports the political campaigns and legal agendas of GOP attorneys general across the country.In their letter to the SEC, 24 of these attorneys general called the commission’s cost-benefit analysis “woefully unfinished” and warned that finalizing the climate disclosure rules “will undoubtedly draw legal challenges”.The Business Roundtable, meanwhile, described the analysis as “fundamentally flawed” and said that its member companies “believe [the costs of the rule] will be orders of magnitude more than what the SEC estimates.” The chamber issued a similar condemnation, writing in its voluminous submission that the SEC’s “economic analysis … is incomplete and substantially underestimates compliance costs.”Asked to comment, neither organization responded specifically to questions of whether it planned to pursue legal action against the SEC if the final rule is not changed significantly.Trade associations might be expected to instinctively oppose new regulations, but in the past such statements have proven to be more than routine political rhetoric. On multiple occasions in response to prior rulemakings, the chamber and the Business Roundtable have successfully sued the SEC on cost-benefit grounds.In 2011, following a suit filed by the two groups, the DC circuit struck down an SEC rule that would have made it easier for shareholders to consider new board members for public companies, deeming the rule “arbitrary and capricious”. The decision in Business Roundtable v SEC said that the commission “neglected its statutory obligation to assess the economic consequences of its rule”, citing, among other figures, a cost estimate submitted to the SEC by the chamber.In their comments on the climate disclosure proposal, the Republican attorneys general and the chamber each cite Business Roundtable v SEC in claiming that the SEC’s cost-benefit analysis is flawed.The Republican letter is co-led by Patrick Morrisey, the West Virginia attorney general who recently helmed a successful legal challenge to the Environmental Protection Agency (EPA).In West Virginia v EPA, the Supreme Court endorsed a relatively novel legal notion – the so-called “major questions doctrine” – to halt an EPA effort to regulate greenhouse gas emissions from power plants. As the Bulletin of the Atomic Scientists explained, “Under this doctrine, when a regulation crosses a certain threshold of being ‘major’ – a line which remains poorly defined – the court rejects the regulation unless it has been clearly authorized by Congress.”The major questions doctrine looks to be the basis of Morrisey’s campaign against the climate disclosure rule. In a July TV appearance, Morrisey said that the Biden administration “can’t get the congressional majorities behind their policies, so they’re trying to resort to the [regulations]. But as we saw with West Virginia v EPA, I don’t think the courts are going to let that happen.” (Morrisey’s office did not respond to emails requesting comment.)“I don’t think there’s any natural reason to infer that the court’s decision [in West Virginia v EPA] would have any implications for the SEC,” said the University of Pennsylvania’s Jill Fisch. “At the same time, you can read the West Virginia case, and you can say: ‘This is part of the Supreme Court, and the federal courts generally, taking a different look at government agencies. This is cutting back on the fourth branch, on the power of the administrative state.’ And if that’s true, in theory, everything is up for grabs.”“Historical legal precedent suggests that the SEC has a pretty strong case,” Tyler Gellasch, the president and CEO of the nonprofit Healthy Markets Association, said. “But if you’re the Business Roundtable, you don’t necessarily need historical legal precedent on your side. You just need a court today. And that seems far more likely today than it would have been at any time in modern history.”TopicsClimate crisisBiden administrationSecurities and Exchange CommissionUS politicsReuse this content More

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      Money Market Funds Melted in Pandemic Panic. Now They’re Under Scrutiny.

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      In March 2020, the Federal Reserve had to step in to save the mutual funds, which seem safe until there’s a crisis. Regulation may be coming.The Federal Reserve swooped in to save money market mutual funds for the second time in 12 years in March 2020, exposing regulatory shortfalls that persisted even after the 2008 financial crisis. Now, the savings vehicles could be headed for a more serious overhaul.The Securities and Exchange Commission in February requested comment on a government report that singled out money market funds as a financial vulnerability — an important first step toward revamping the investment vehicles, which households and corporations alike use to eke out higher returns on their cashlike savings.Treasury Secretary Janet L. Yellen has repeatedly suggested that the funds need to be fixed, and authorities in the United States and around the world have agreed that they were an important part of what went wrong when markets melted down a year ago.The reason: The funds, which contain a wide variety of holdings like short-term corporate debt and municipal debt, are deeply interlinked with the broader financial system. Consumers expect to get their cash back rapidly in times of trouble. In March last year, the funds helped push the financial system closer to a collapse as they dumped their holdings in an effort to return cash to nervous investors.“Last March, we saw evidence of how these vulnerabilities” in financial players that aren’t traditional banks “can take the existing stress in the financial system and amplify it,” Ms. Yellen said last month at her first Financial Stability Oversight Council meeting as Treasury secretary. “It is encouraging that regulators are considering substantive reform options for money market mutual funds, and I support the S.E.C.’s efforts to strengthen short-term funding markets.”But there are questions about whether the political will to overhaul the fragile investments will be up to the complicated task. Regulators were aware that efforts to fix vulnerabilities in money funds had fallen short after the 2008 financial crisis, but industry lobbying prevented more aggressive action. And this time, the push will not be riding on a wave of popular anger toward Wall Street. Much of the public may be unaware that the financial system tiptoed on the brink of disaster in 2020, because swift Fed actions averted protracted pain.Division lines are already forming, based on comments provided to the S.E.C. The industry used its submissions to dispute the depth of problems and warn against hasty action. At least one firm argued that the money market funds in question didn’t actually experience runs in March 2020. Those in favor of changes argued that something must be done to prevent an inevitable and costly repeat.“Short-term financing markets have been driven by a widespread perception that money funds are safe, making it almost inevitable the federal government provides rescue facilities when trouble hits,” said Paul Tucker, chair of the Systemic Risk Council, a group focused on global financial stability, in a statement accompanying the council’s comment letter this month. “Something has to change.”Ian Katz, an analyst at Capital Alpha, predicted that an S.E.C. rule proposal might be out by the end of the year but said, “There’s a real chance that this gets bogged down in debate.”While the potential scope for a regulatory overhaul is uncertain, there is bipartisan agreement that something needs to change. As the coronavirus pandemic began to cause panic, investors in money market funds that hold private-sector debt started trying to pull their cash out, even as funds that hold short-term government debt saw historic inflows of money.That March, $125 billion was taken out of U.S. prime money market funds — which invest in short-term company debt, called commercial paper, among other things — or 11 percent of their assets under management, according to the Financial Stability Board, which is led by the Fed’s vice chair for supervision, Randal K. Quarles.One type of fund in particular drove the retreat. Redemptions from publicly offered prime funds aimed at institutional investors (think hedge funds, insurance companies and pension funds) were huge, totaling 30 percent of managed assets.The reason seems to have its roots, paradoxically, in rules that were imposed after the 2008 financial crisis with the aim of preventing investors from withdrawing money from a struggling fund en masse. Regulators let funds impose restrictions, known as gates, which can temporarily prohibit redemptions once a fund’s easy-to-sell assets fall below a certain threshold.Investors, possibly hoping to get their money out before the gates clamped down, rushed to redeem shares.The fallout was immense, according to several regulatory body reviews. As money funds tried to free up cash to return to investors, they stopped lending the money that companies needed to keep up with payroll and pay their utility bills. According to a working group report completed under former Treasury Secretary Steven Mnuchin, money funds cut their commercial paper holdings by enough to account for 74 percent of the $48 billion decline in paper outstanding between March 10 and March 24, 2020.As the funds pulled back from various markets, short-term borrowing costs jumped across the board, both in America and abroad.“The disruptions reverberated globally, given that non-U.S. firms and banks rely heavily on these markets, contributing to a global shortage of U.S. dollar liquidity,” according to an assessment by the Bank for International Settlements.The Fed jumped in to fix things before they turned disastrous.It rolled out huge infusions of short-term funding for financial institutions, set up a program to buy up commercial paper and re-established a program to backstop money market funds. It tried out new backstops for municipal debt, and set up programs to funnel dollars to foreign central banks. Conditions calmed.A primary concern is that investors will expect the Federal Reserve to save money market funds in the future, as it has in the past.Stefani Reynolds for The New York TimesBut Ms. Yellen is among the many officials to voice dismay over money market funds’ role in the risky financial drama.“That was top of F.S.O.C.’s to-do list when it was formed in 2010,” Ms. Yellen said on a panel in June, referring to the Financial Stability Oversight Council, a cross-agency body that was set up to try to fill in regulatory cracks. But, she noted, “it was incredibly difficult” for the council to persuade the Securities and Exchange Commission “to address systemic risks in these funds.”Ms. Yellen, who is chair of the council as Treasury secretary, said the problem was that it did not have activity regulation powers of its own. She noted that many economists thought the gates would cause problems — just as they seem to have done.Of particular concern is whether investors and fund sponsors may become convinced that, since the government has saved floundering money market funds twice, it will do so again in the future.The Trump-era working group suggested a variety of fixes. Some would revise when gates and fees kicked in, while another would create a private-sector backstop. That would essentially admit that the funds might encounter problems, but try to ensure that government money wasn’t at stake.If history is any guide, pushing through changes is not likely to be an easy task.Back in 2012, the effort included a President’s Working Group report, a comment process, a round table and S.E.C. staff proposals. But those plans were scrapped after three of five S.E.C. commissioners signaled that they would not support them.“The issue is too important to investors, to our economy and to taxpayers to put our head in the sand and wish it away,” Mary Schapiro, then the chair of the S.E.C., said in August 2012, after her fellow commissioners made their opposition known.In 2014, rules that instituted fees, gates and floating values for institutional funds invested in corporate paper were approved in a narrow vote under a new S.E.C. head, Mary Jo White.Kara M. Stein, a commissioner who took issue with the final version, argued in 2014 that sophisticated investors would be able to sense trouble brewing and move to withdraw their money before the delays were imposed — exactly what seems to have happened in March 2020.“Those reforms were known to be insufficient,” Ben S. Bernanke, a former Fed chair, said at an event on Jan. 3.The question now is whether better changes are possible, or whether the industry will fight back again. While asking a question at a hearing this year, Senator Patrick J. Toomey, Republican from Pennsylvania and chair of the Banking Committee, volunteered a statement minimizing the funds’ role.“I would point out that money market funds have been remarkably stable and successful,” Mr. Toomey said.Alan Rappeport More